Under a cap and trade program the state puts a cap on total greenhouse gas emissions ranging from smokestacks to tailpipes. It then auctions off a certain number of allowances to emit those gases. Businesses can then buy them and sell or trade with other business who might pay a higher price. Ultimately, this is designed to force carbon reductions where they are cheapest, rather than uniformly across all sources.

Creating such a marketplace would lower the overall economic burden, according to DEQ. Auctioning off the ability to emit greenhouse gases would also generate hundreds of millions in revenue.

Several industries, such as energy providers and fuel suppliers, have been opposed to caps and prices on carbon.

Associated Oregon Industries, which lobbies on behalf of business interests, has opposed previous carbon reduction efforts and previously called cap and trade “one of the most unfair and regressive forms of taxation for Oregonian’s.”

AOI issued a statement in response to questions saying its members invest heavily in carbon reduction efforts and that DEQ’s report offered too few details for it to have an opinion.

“Our concern with previous climate legislation is that the proposals were designed in a way that would create a competitive disadvantage for Oregon businesses while not reducing global emissions,” AOI said.

A price on carbon would hurt rural and low-income communities, according to the DEQ report, where fuel costs typically consume a bigger percent of incomes. DEQ recommends using revenue from the program toward worker training, job creation and improved energy efficiency in those communities.

Much of the revenue would likely go towards transportation infrastructure via the state’s Highway Fund because of how the state’s constitutional restricts fees or taxes on transportation fuels.

Other portions of the revenue could be invested back into efforts to reduce carbon emissions, through tax incentives for energy efficient appliances or low-emission vehicles.

DEQ Senior Climate Policy Advisor Colin McConnaha said a cap-and-trade program could help the state reach its goals for reducing greenhouse gases. Oregon is currently not on track to come within striking distance of those goals.

The report was done at the request of the Oregon Legislature last year after a cap-and-trade bill was introduced. Similar legislation has been introduced this year, and lawmakers are expected to consider carbon limits in the current session.

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